When Governor Robert Bentley stopped in town this week to talk about the agreement they made to decrease wind insurance rates for people with AIUA (Alabama Insurance Underwriters Association), it may have seemed like a good thing.
“We are making the right steps in the right direction, and that is what I am so proud of. This is how government and private entities and private individuals should work together,” Bentley said.
But, Joshua Newell, President of Coastal Insurance Solutions, warns that switching your policy to AIUA to save money might cost you a lot more in the end, especially if we have a busy hurricane season.
“My concern is that you’re going to have a bunch of people standing there with AIUA who aren’t going to have the money to repair their house. I’ve personally seen people that have AIUA and their $20,000 claim is reduced down to less than a couple of thousand dollars. So, all of a sudden they’ve got to come up with the rest of the money to repair their house,” Newell said.
AIUA was created to be used as a last resort if no other provider would cover you. It even says on their website that it is a basic, ‘no-frills’ policy . After Hurricane Katrina, a number of providers stopped issuing wind insurance because it was too risky, but Newell said that’s not the case anymore and more than 20 providers are offering policies.
Even with more options on the table, Newell said people are freely choosing to switch their coverage to AIUA because they think they’re getting a great deal.
“They’re not educating the consumers on what this is. They’re just asking people to call their agents and ask for a quote from AIUA,” Newell said, referencing Wednesday’s press conference. “Most of the time people don’t know. They just sign the paperwork, and they never question anything. Then, whenever they have a claim, that’s when they say, ‘well I thought I had this…’ And, the response back from the insurance company is, ‘you signed this piece of paper.'”
Newell said it’s possible that even if you use home insurance with another agency like Allstate, State Farm, etc., you might actually be covered by AIUA for wind insurance.
“Go back and look through your policy, and if you have AIUA, you look around and if you see something that says DP01, then you need to call your agent and ask them more about that. That’s going to mean you have Actual Cash Value and that’s where you’re going to run into problems at claim time.
“I’ve watched people lose their homes over this, and that’s what I’m scared is going to happen if another major storm rolls through Mobile or Baldwin County. These people are going to be standing there saying, ‘what do I do? How do I pay for this? I didn’t get anything for my claim,”’ Newell said.
His advice is to slow down before making the switch because if the price seems too good to be true, it usually is.